Silver mutual fund schemes and exchange-traded funds will see a short supply of the white metal with the government imposing curbs on imports.
Following the government curbs that require imports to get permits from the Directorate-General of Foreign Trade (DGFT), silver ETFs jumped between 4 per cent and 0.24 per cent on the stock exchange, bucking the weak prices trend in the domestic markets.
Silver prices were down marginally at ₹268,040 a kg against ₹ 2,68,500 during the weekend, according to data from the Indian Bullion and Jewellers Association of India.
MFs report outflow
The demand for silver ETFs has suddenly picked up, even as MFs have been reporting a net outflow from silver funds in the last few months. This is a clear indication that equity investors are trying to diversify and take advantage of a possible rally in domestic silver prices due to short-supply in the coming days.
Silver ETFs are trading well below the indicative Net Asset Value (i-NAV) announced by MFs as domestic silver, as domestic prices are at a discount of about $1.5 -$2 an ounce.
Satish Dondapati, Fund Manager, Kotak Mahindra AMC, said the import restriction may support Indian silver prices gradually over the coming months.
“Silver had already risen sharply in recent weeks, mainly due to the duty hike, so some investors or traders booked profits in the last 2-3 sessions. A large part of the positive impact was already reflected in prices earlier,” he said.
Import duty hike
In a notification, the DGFT on Saturday said the import policy for silver, including silver plated with gold and platinum, has been revised “from free to restricted” with immediate effect. Goods placed under the “restricted” category can only be imported against a valid licence issued by the government.
The latest curbs come within days of the government increasing the import duty on precious metals from 6 per cent to 15 per cent. The revised structure includes a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess. India’s silver imports crossed $12 billion in fiscal year 2026, registering a 150 per cent jump from the previous year.
After a historic inflow of ₹3,962 crore and ₹9,463 crore in December and January, silver schemes of MFs have recorded a steady net outflow of ₹1,637 crore in the last three months as early investors booked profit after prices started moving down.
Redirecting supply
Renisha Chainani, Head of Research at Augmont, said the government is consciously redirecting India’s silver supply chain away from import dependence toward domestic refining and reducing CAD pressure.
“The market will adjust, which will neither be quick nor painless. Silver market participants must now navigate a fundamentally different regulatory and supply landscape than existed even two weeks ago,” she said.
Silver prices have dropped by over 35 per cent since hitting a record high of over $121 an ounce on January 29 this year. Currently, it is ruling at $77.70 an ounce. Silver has gained nearly 9 per cent this year, a tad more than gold, which has increased by 5.5 per cent.